According to to the Military Times, "Prince ... believes a small footprint of private military contractors and even smaller footprint of U.S. special operators may be able to accomplish what hundreds of thousands of U.S. troops and NATO forces over the last 17 years could not. ... Prince also thinks that, ultimately, cost savings might convince the president to try something new. Prince said his plan would cost $5 billion a year, a fraction of what it currently costs the U.S. to operate in Afghanistan."

Ultimately, of course, whether or not Prince's plan accomplishes the government's objectives in Afghanistan — objectives that remain murky and ever-changing to this day — it's a win-win for Prince. He'll get billions in revenue out of the deal no matter what.

From an economic perspective, is this a good idea? If the plan really did reduce spending in Afghanistan to $5 billion, that would certainly be a good thing. This would require, however, that the Prince plan replace the current plan, which costs taxpayers $45 billion per year. $780 million of that goes to economic aid, and $13 billion is spent on US forces in Afghanistan.

But, even if the US only cut back the $13 billion spent on military forces, the Prince plan would still be a savings.

"Privatization" Rarely Means Market Prices or Market Exchanges

Of course, when we use the word "privatize" in this context, we don't really mean anything of the sort. Prince's plan would be "privatization" in the same way that a city government might privatize road building. The government hires a private firm to perform the services — but it's all paid for with taxpayer money.

Privatization may have some advantages. In the case of road building, privatization means the government no longer has to maintain and store its own equipment. Of course, whatever fees a government pays for the roads will have to cover the firm's costs of storing and maintaining its own equipment.

Whether or not this actually saves the taxpayer any money is never a given. It might, or it might not, depending on the situation.

At least in the case of road building it's fairly easy to see if services have been performed. Even then, it's hard to know how long, or how well, the road will last. Determining whether or not services have been competently rendered in Afghanistan is something far harder to evaluate.

This brings us to the second way in which "privatization" has nothing to do with a truly private sector.

With Erik Prince and his "private" military, there are no market prices and no way of determining if the firm is operating "efficiently."

In a truly private market transaction, purchases are paid for voluntarily by the customer at market prices.

A "privatized" war by the US government is still paid by taxpayers under pain of fine or imprisonment. This is no market transaction. Firm efficiency then just becomes a matter of delivering services in a way that will please elected officials while convincing them to approve yet another budget line item for "services rendered."

All else being equal, it's potentially the case, that the plan could decrease government spending. Unfortunately, there are numerous complicating factors that must also be considered.

As of 2013, there were 43 active-duty personnel per 10,000 US residents. That was down considerably from the 82 per 10,000 that existed in the direct wake of the Cold War. Numbers had been much higher during the Cold War, when, in the midst of the Vietnam War in 1970, there were 150 active duty personnel per 10,000 US residents.2

Even with these steep drops, of course, the US still has a much larger permanent federal military than would ever have been tolerated prior to the Civil War. Given the tiny troop totals funded by the US government in that period, historian Marcus Cunliffe concludes that, as late as the 1840s, "Americans in many areas had no idea what a regular officer looked like." By "regular" Cunliffe means a professional soldier employed by the federal government. Many Americans were familiar with the militias at the time.3 But federal soldiers were a rare oddity.

This changed significantly in the twentieth century as conscription became commonplace, and as the US remained in a state of near-constant military buildup after the Second World War.

Once the US switched to an all-volunteer military after 1973, though, troop numbers began to decline. They continued to decline with the end of the Cold War.

Military, spending, however, did not decline. When adjusted for inflation, military spending since 2004 has been above or near Cold-War-Reagan-Era levels . If spending on veterans and "Homeland Security" is included — as it should be — then spending levels are now well above what they were during the Cold War.

But if troop levels are falling, where is all that money going?

Replacing Troops with Machinery and Military Contractors

Part of the money, of course, is used to fund what might be called "labor-saving devices" in a military context. That is, capital and cash can be used to design, purchase, and deploy vehicles, weapons, and devices that can deliver the same amount of destructive power equal to what once required a sizable number of soldiers. In other words — as with many other endeavors — machinery can be substituted for personnel.

But this can't always be done, and that's where the paid mercenary "contractors" come in.

As Micah Zenko reported in Foreign Policy in 2016, military contractors have become a growing part of US military operations:

As noted previously, there are roughly three contractors (28,626) for every U.S. troops [sic] (9,800) in Afghanistan, far above the contractor per uniformed military personnel average of America’s previous wars. In Iraq today, 7,773 contractors support U.S. government operations — and 4,087 U.S. troops. These numbers do not include contractors supporting CIA or other intelligence community activities, either abroad or in the United States. On April 5, Adm. Michael Rogers, commander of the U.S. Cyber Command, declared during a Senate hearing that contractors made up 25 percent of his workforce.

Numbers like these, however, are not easy to come by. Zenko continues:

“The first thing you learn when studying the role contractors play in U.S. military operations is there’s no easy way to do so. The U.S. government offers no practical overview, especially for the decade after 9/11. U.S. Central Command (CENTCOM) began to release data on contractors only in the second half of 2007 — no other geographic combatant command provides such data for their area of operations. ... DOD still does not have a system that reliably tracks killed and wounded contractor personnel.” Just last month [April 2016], an especially exasperated John McCain, chairman of the Senate Armed Services Committee, told acting Secretary of the Army Patrick Murphy, “We look forward to the day you can tell us how many contractors are employed by [the Department of Defense].”

This lack of transparency in mercenary troop levels serves a political purpose.

Contractors also encourage mission creep, because contractors don't count as "boots on the ground." Congress does not consider them to be troops, and therefore contractors do not count against troop-level caps in places like Iraq. The U.S. government does not track contractor numbers in war zones. As a result, the government can put more people on the ground than it reports to the American people, encouraging mission creep and rendering contractors virtually invisible.

For decades now, the centrality of contracting in American warfare — both on the battlefield and in support of those on the battlefield — has been growing. During World War II, about 10 percent of America’s armed forces were contracted. During the wars in Iraq and Afghanistan, that proportion leapt to 50 percent. ... Today, 75 percent of U.S. forces in Afghanistan are contracted. Only about 10 percent of these contractors are armed, but this matters not. The greater point is that America is waging a war largely via contractors, and U.S. combat forces would be impotent without them. If this trend continues, we might see 80 or 90 percent of the force contracted in future wars.

Between Jan. 1, 2009, and March 31, 2016, 1,540 contractors were killed in Iraq and Afghanistan (176 in Iraq and 1,364 in Afghanistan). During that period, 1,301 U.S. troops were killed in Afghanistan and Iraq (289 in Iraq and 1,012 in Afghanistan). Last year [2015] was even more skewed toward contractors than the preceding six years; 58 contractors died in Afghanistan or Iraq, while less than half as many U.S. troops did (27) fighting in either country, including Syria.

It's easy to see how all this makes things easier for American politicians. With a military strategy so reliant on people other than US soldiers, politicians can reward their friends and donors with ever increasing levels of military spending. They can keep any number of splendid little wars going, and the voters will rarely hear about any troop casualties or "boots on the ground." The lack of American troops on the ground in Syria, or Yemen, or Afghanistan allows politicians to claim that the military operations are being "phased out," or "wound down." In reality, the money keeps flowing, and the bombs keep flying.

The political effect has been to make it easier to avoid attracting the attention of voters when military operations are ratcheted up. After all, when contractors do die in combat, their names are rarely mentioned in the news, as is often the case of US soldiers. And many of the dead are foreigners, anyway.

Thus, in determining whether it's a good idea to double down on the use of military contractors, as Erik Prince would have us do, it needs to be more than a decision about spending levels. Relying more and more on contractors is essentially a political strategy designed to make it easier to hide information about Americans foreign policy from voters.

Another consideration is one of American civil liberties. In the eighteenth and nineteenth centuries, American political ideology inveighed heavily against the existence of a federally-controlled standing army. The fear was that a sizable force of ground troops could be used to violently impose government policy on the US population. This fear of standing armies was the primary motivation behind the Second Amendment and general political opposition to a well-funded military establishment. In two essays here at mises.org devoted to this issue, I pointed out that calling for a large and powerful military was in conflict with the Second Amendment as imagined by the people who wrote it. In response, many commenters in social media and here at the site claimed that the military will never be a threat to US citizens because "they take an oath to uphold the constitution." This in itself is an extremely naïve statement, of course. But even if it weren't naïve, would the same claims about a devotion to an oath about the US Constitution apply to combat-experienced soldiers employed as contractors? It seems unlikely. Naturally, it would be illegal for the US government to use such personnel against US residents in the US. But in times of crisis and strife, the fact something is illegal has never been much of a hindrance to the US government. It doesn't require the world's most active imagination to imagine an American future in which military contractors are employed to "restore law and order" to a turbulent political situation.

1. Active duty totals are compared as a ratio with population totals. Data on troop totals from 1790 to 1990 are found in: "Selected Manpower Statistics, Fiscal Year 1997" (http://www.alternatewars.com/BBOW/Stats/DOD_SelectedStats_FY97.pdf) 2013 actice duty totals: http://download.militaryonesource.mil/12038/MOS/Reports/2013-Demographics-Report.pdfPopulation totals are from the Census Bureau.

2. I have excluded the World War II numbers here which are off the charts compared to every other period. In 1945, for example, there were more than 12 million active duty personnel for a total US population of 139 million. That means there were 867 active duty personnel per 10,000 US residents.

London is a major global hub, and a hard Brexit wouldn't change that. But one of the best possible outcomes of Brexit could be a move toward real free trade beyond the faux "free trade" of the EU bloc.